New rail minister won't hike fare for turnaround

New rail minister won't hike fare for turnaround

For Indian Railways, performance parameters have always been wrapped up in supposed magic.

Lalu Prasad, who became the railway minister in May 2004, surprised the world in 2008 with the 'magic' turnaround he effected for the near-bankrupt railways, claiming to have created a surplus of Rs 25,000 crore (Rs 250 billion.

It was equal magic when Mamata Banerjee, the previous railway minister, announced in her budget speech earlier this year that she managed to bring down the operating ratio, a performance indicator, during the last financial year.

New rail minister won't hike fare for turnaround

This was despite a Rs 4,000-crore (Rs 40-billion) loss on account of a drop in iron ore loading and the Gujjar agitation coupled with a Rs 15,000-crore (Rs 150-billion) outgo on account of pay commission recommendations.

Continuing with the legacy, new railway minister Dinesh Trivedi, while taking charge earlier this week, promised magic again -- a turnaround without raising passenger fares.

"Increasing passenger fares is the easiest thing to do for improving finances.

"But we have to see whether there are alternative measures," Trivedi said. Indian Railways' losses from passenger operation are about Rs 14,000 crore (Rs 140 billion), around 15 per cent of its overall annual earnings of Rs 94,800 crore (Rs 948 billion).

New rail minister won't hike fare for turnaround

Experts believe an increase in passenger fares, frozen for the past eight years, should form an important aspect of railways' strategy to improve its financial health.

"For example, the potential for a hike exists in the lower-class passenger segment, owing to the huge passenger volumes it contributes.

"By raising the quality of service to this segment, and increasing its fares marginally in return, railways could generate income which might not appear huge but could aid in ramping up revenues," says Tarun Kumar Gupta, senior manager, PricewaterhouseCoopers.

New rail minister won't hike fare for turnaround

The lower-class unreserved segment -- generally called second class (ordinary) -- accounted for 83 per cent of the railways' overall passenger volume and contributed 23 per cent of the total passenger revenue of Rs 26,126 crore (Rs 261.26 billion) in the last financial year.

CHUGGING ONClass-wise contribution to passenger volume and revenue in 2010-11